No carbon tax on petrol, but who’ll bear the brunt?

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Disclosure statement

Richard Heaney does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.

The recent announcement that a carbon tax would not be levied on petrol for cars or light vehicles used by motorists, tradespeople and small businesses is an interesting political statement.

But this statement is made alongside the requirement that business will face cutbacks on fuel tax concessions. So while costs may not increase at the petrol pump they will certainly increase in every other facet of Australian life through the greater costs of fuel to industry more generally.

Another blow to farmers?

The devil is in the detail with policy statements like these.

What is a tradesperson or a small business for the purposes of the exemption?

Will this definition include farmers? Will the farming community face another shock following the floods, the recent ban on live cattle and increasing regulation of the sector?

Given recent evidence of Government ignorance concerning this critical sector of Australian business and society, it is possible that the farmers will be hit yet again with another badly thought out policy.

Without a petrol tax, where’s the incentive?

The exclusion is a rather odd because a well thought out carbon tax would have a direct impact on petrol use if it were levied at the petrol pump. Cars that use more petrol would cost more to fill.

This provides an immediate incentive to swap large older inefficient polluting vehicles for smaller more fuel efficient vehicles. The real cost of small fuel efficient cars has been falling for a number of years and so buying a new car is becoming easier.

Of course there are other ways of dealing with motor vehicle pollution without the carbon tax. But these are less direct and will have unintended consequences.

Other approaches; unintended consequences

The imposition of best practice pollution controls for new motor vehicles is one possible approach. But this regulation will have little impact on the aging motor vehicles that account for a large proportion of Australian motor vehicles presently on the road.

Perhaps the Government could consider an incentive scheme like that put in place by the Obama Government in the US to reduce the level of old vehicles on the roads.

Ultimately this statement must be converted to laws and regulations. It will be interesting to see what happens at the margin.

There will be unintended consequences that flow from this decision. Let’s hope that compromising the air we breathe and the food we eat will not be among those consequences.